Chapter+14+-+2009

Chapter+14+-+2009 - Exercise 14.2 Inventory cost flow...

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Unformatted text preview: Exercise 14.2 Inventory cost flow methods periodic inventory system 1. Cost of sales FIFO: From inventory, 1 June 8 000 units @ $18.00 $144 000 From purchase of 3 June 7 000 units @ $19.00 133 000 From purchase of 15 June 9 000 units @ $19.50 175 500 24 000 units $452 500 2. Cost of sales weighted average: Average cost per unit - $811 000 42 000 = 19.31 Cost of sales 24 000 @ $19.31 = $463 440 Exercise 14.4 Net realisable value Estimated sales price $23 500 Less : Selling and disposal cost 1 800 Net realisable value $21 700 This demonstrator would be reported at $21 700. As the net realisable value is less than its original cost of $22 000, profit will be reduced by $300, i.e. ($22 000 - $21 700) in the current period. 2 Exercise 14.6 FIFO and average cost flow methods periodic and perpetual inventory systems E. FIFO reported the same ending inventory balance and cost of sales under the periodic and perpetual system. The reported ending inventory balance and cost of sales for all options only resulted in slight variations. The highest ending inventory balance was recorded using FIFO. The lowest inventory balance was recorded using the weighted average method (periodic). In all cases, the cost of sales is inversely related to ending inventory, i.e. the highest inventory balance corresponds with the lowest reported cost of sales and the lowest ending inventory balance corresponds with the highest cost of sales calculation. 3 Exercise 14.9 Cost of sales under FIFO A. FIFO: Periodic Cost of sales (115 units + 80 units): 40 units @ $10.00 $400.00 155 units @ $11.00 $1705.00 195 units $2 105.00 Answer is No. 3. = $2 105 B. Moving average method: Perpetual Purchases Sales Balance Date Explanatio n Units Unit Cost Total Cost Units Unit Cost Total Cost Uni ts Unit Cost Total Cost 1/11 Beg. invent. 40 $10.00 $400.00 6/11 Purchase 170 $11 $1 870 210 $10.81 $2 270.00 10/11 Sale 80 $10.81 $864.80 130 $10.81 $1 405.20 14/11 Purchase 80 $12 $960 210 $11.26 $2 365.20 18/11 Purchase Retn (20) $12 $(240) 190 $11.19 $2 125.20 23/11 Sale 130 $11.19 1 454.70 60 $11.19 $670.50 Answer is 3. = $11.19 4 Exercise 14.10 Perpetual inventory system and inventory errors Part A FIFO: Perpetual Purchases Sales Balance Date Explanation Units Unit Cost Total Cost Unit s Unit Cost Total Cost Unit s Unit Cost Total Cost 1/5 Beg. invent. 50 $10 $500 7/5 Purchases 20 $11 $220 50 $10 20 $11 $720 11/5 Sales 50 $10 $500 4 $11 $44 16 $11 $176 17/5 Purchases 30 $12 $360 16 $11 30 $12 $536 21/5 Purchase (10) $11 $(110) 6 $11 Return 30 $12 $426 24/5 Sales 6 $11 $66 24 $12 $288 6 $12 $72 29/5 Sales (8) $12 $(96) Return 14 $12 $168 $802 Ending inventory $168 Cost of sales $802 5 Part B Required: Prepare any journal entries required on 30 June 2006 to correct error(s) and to adjust the inventory account (Use the general journal)....
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This note was uploaded on 07/29/2011 for the course BUS 444 taught by Professor Lynn during the Spring '11 term at Keuka.

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Chapter+14+-+2009 - Exercise 14.2 Inventory cost flow...

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